Executive Summary
This report compares the 15 largest equity funds from six major Canadian banks (RBC, TD, BMO, CIBC, Scotia, and National Bank) to the 15 largest Fidelity equity funds. Using Morningstar Canada data (as of August 2025), we examine long-term performance, risk measures, and risk-adjusted returns. The findings are clear: Fidelity's equity lineup delivers higher consistency, better alpha, and stronger long-term compounding potential for incorporated business owners focused on dynasty wealth.
Fund performance is not the primary driver of client flows. Fidelity, on the other hand, cannot rely on bank branches. Its culture is single-minded: deliver value through performance. For Fidelity, alpha is the marketing strategy.
As an independent advisor with access to bank funds as well as independent fund families, I consistently test value across platforms. Years of comparisons point to Fidelity as the more reliable source of client value. My duty is not to sell what is easiest to distribute, but what compounds the most value for clients over generations.
Key Findings
Why This Matters to the Business Owner
For incorporated business owners, corporate investing is not about short-term results but building family wealth that lasts across generations. Even a modest 1.19% annual performance gap, when compounded over 20 to 50 years, results in multi-million dollar differences. Because equity-focused investing is more tax-efficient in corporate accounts than balanced or conservative mandates, the choice of equity funds matters enormously.
A 1.19% annual outperformance (10.64% vs 9.45%) on a $1M investment compounds to an additional $1.5M over 20 years and $66M over 50 years.
Why Crowd Thinking Hurts Results
The majority of Canadian investors remain in their bank's in-house products, not because these funds deliver superior outcomes, but because distribution is convenient. This crowd thinking results in average or below-average outcomes being accepted as the norm. Over decades, such complacency erodes family wealth.
Banks benefit from built-in distribution through branch networks, creating client lock-in that encourages complacency in fund performance rather than excellence.
Generational Wealth Impact
Consider the effect of compounding based on 10-year performance data:
20-Year Horizon
50-Year Horizon
The implications for dynasty wealth are profound: the right fund lineup can mean the difference between maintaining and multiplying a family's capital base.
Performance Data Analysis
Key Performance Metrics
| Firm | Morningstar Stars (avg) | ESG Risk Score (avg) | Alpha (3y avg) | Beta (3y avg) | Sharpe (3y avg) |
|---|---|---|---|---|---|
| RBC | 3.43 | 3.2 | -2.9 | 0.96 | 0.76 |
| TD | 3.33 | 3 | -1.11 | 0.94 | 0.85 |
| BMO | 2.93 | 3 | -2.23 | 0.94 | 0.83 |
| CIBC | 2.93 | 3.13 | -2.79 | 0.98 | 0.73 |
| Scotia | 3.07 | 3.33 | -2.49 | 0.94 | 0.75 |
| National Bank | 3.21 | 4.07 | -2.27 | 0.91 | 0.78 |
| Bank Average | 3.15 | 3.31 | -2.27 | 0.95 | 0.78 |
| Fidelity (Independent) | 3.77 | 2.13 | 0.83 | 0.98 | 0.96 |
Long-Term Returns
| Firm | Avg 5-Year Return (%) | Avg 10-Year Return (%) |
|---|---|---|
| RBC | 10.66% | 8.80% |
| TD | 11.30% | 9.89% |
| BMO | 11.91% | 9.07% |
| CIBC | 11.15% | 9.52% |
| Scotia | 11.23% | 9.85% |
| National Bank | 11.64% | 9.56% |
| Bank Average | 11.31% | 9.45% |
| Fidelity (Independent) | 13.76% | 10.64% |
Visual Performance Comparison
Alpha measures risk-adjusted performance relative to the market. Positive alpha indicates value creation above what would be expected given the risk taken. Fidelity is the only provider consistently generating positive alpha (+0.83), while the bank average shows negative alpha (-2.27), indicating systematic underperformance relative to their risk exposure. This 3.10 point alpha gap represents a substantial difference in risk-adjusted value creation for investors.
Performance Dispersion Analysis
One of the most telling data points is the dispersion of returns: how consistently funds perform across a provider's lineup. High dispersion means uneven outcomes, where some funds shine while others lag, leading to suboptimal wealth building. Using the August 2025 Morningstar data, the standard deviation (SD) of 5-year and 10-year returns was calculated for Fidelity versus the banks. Lower SD indicates more reliable performance across the board.
| Provider | 5-Year Return SD (%) | 10-Year Return SD (%) |
|---|---|---|
| Fidelity | 4.82 | 2.91 |
| RBC | 5.67 | 3.45 |
| TD | 6.12 | 4.02 |
| BMO | 5.89 | 3.78 |
| CIBC | 6.34 | 4.15 |
| Scotia | 5.95 | 3.89 |
| National Bank | 6.01 | 3.96 |
| Bank Average | 6.00 | 3.88 |
Fidelity's lower dispersion (e.g., 4.82% SD on 5-year returns vs. banks' 6.00%) reflects more consistent performance. This consistency reduces the risk of selecting underperforming funds and provides more predictable wealth-building outcomes for business owners.
Projections & Graphs
We modeled the growth of $1M and $10M corporate investments using Fidelity's 10-year average vs. the Bank average across 10, 20, and 50 years. The graphs illustrate how small differences in return compound into enormous gaps in dynasty wealth.
Impact of 1.19% Annual Performance Gap (10-Year Returns)
$1M: Fidelity vs Bank Average (20 years)
$10M: Fidelity vs Bank Average (50 years)
Even a 1.19% annual difference in 10-year returns creates substantial wealth gaps. The right fund lineup can mean the difference between maintaining and multiplying a family's capital base across generations.
Recommended Course of Action
- 1 Work with an independent advisor who has open access to both bank-distributed and independent fund families.
- 2 Prioritize equity-focused mandates that maximize corporate after-tax compounding.
- 3 Use data-driven analysis, not marketing, as the decision framework.
- 4 Review performance and risk-adjusted metrics regularly (alpha, Sharpe ratio, dispersion) to ensure ongoing alignment with long-term goals.
Methodology & Data Sources
The analysis was conducted using Morningstar Canada (August 2025) data. For each institution, we selected the 15 largest funds (by AUM). Balanced funds, conservative mandates, and portfolio-of-funds products were deliberately excluded as they deliver lower returns and are less tax-efficient for corporate investors. Metrics analyzed included total returns (5y & 10y), alpha, Sharpe ratio, beta, Morningstar star ratings, and ESG risk scores.
Analysis Scope
- 15 largest equity funds per institution
- Focus on long-term performance (5-year and 10-year horizons)
- Risk-adjusted metrics (Alpha, Sharpe ratio, Beta)
- Quality indicators (Morningstar stars, ESG scores)
- Performance dispersion analysis (Standard deviation of returns)
- Data as of August 2025 from Morningstar Canada
Findings: Performance & Risk
Across the 5-year and 10-year horizons, Fidelity equity funds outperformed the banks' largest equity funds both on raw returns and risk-adjusted measures (alpha and Sharpe ratio). The banks' fund shelves exhibited greater variability, meaning client outcomes were less consistent. Fidelity showed tighter dispersion with a performance-driven culture.
Key averages:
| Metric | Fidelity | Bank Average |
|---|---|---|
| 5-Year Return (%) | 13.76 | 11.31 |
| 10-Year Return (%) | 10.64 | 9.45 |
| Alpha (3-Year) | 0.83 | -2.27 |
| Sharpe Ratio (3-Year) | 0.96 | 0.78 |
| Morningstar Rating (Overall) | 3.77 | 3.15 |
| ESG Risk Rating (Lower Better) | 2.13 | 3.31 |
| 5-Year Return SD (Lower Better) | 4.82 | 6.00 |
| 10-Year Return SD (Lower Better) | 2.91 | 3.88 |
Key Results:
10 years: Fidelity advantage already visible with 1.19% outperformance.
20 years: Differences widen materially, creating millions in delta.
50 years: The independent vs bank gap defines legacy outcomes.
Consistency: Lower dispersion means more predictable wealth building outcomes.
Alpha as Culture
Performance differences are not just statistical: they are cultural. Canadian banks benefit from built-in distribution via their branch networks, which creates client lock-in and encourages complacency. Independent fund companies like Fidelity must compete purely on merit, creating a performance-driven culture that benefits long-term investors.
Independent managers face constant scrutiny and must deliver superior results to attract and retain assets, while bank-distributed funds benefit from captive distribution channels that reduce competitive pressure.
Conclusion
Choosing where to allocate corporate investments is one of the most consequential decisions for business owners who want to build dynasty wealth. The data shows that independent fund providers, especially Fidelity, have outperformed the major Canadian banks' equity funds in both return and risk-adjusted metrics. An independent, data-driven approach, focused on compounding value rather than crowd thinking, offers the greatest opportunity to protect and multiply family capital over generations.
The magic of compound interest is most powerful when combined with superior returns. For family wealth that spans generations, every percentage point matters.